On July 4, 2025, President Trump signed the FY2025 reconciliation act (P.L. 119-21), the "One Big Beautiful Bill Act," which included the first federal school voucher program in American history. The Federal Tax Credit Scholarship Program created a mechanism for taxpayers to receive up to $1,700 in tax credits for donations to nonprofit Scholarship Granting Organizations (SGOs), which distribute scholarships for private and religious school tuition. The program takes effect January 1, 2027.
Program Structure
Tax Credit: Individual taxpayers receive a dollar-for-dollar tax credit of up to $1,700 for cash contributions to qualifying SGOs. The House version capped total federal payouts at $5 billion per year ($20 billion over four years), but the Senate removed the ceiling entirely -- meaning the program has no upper limit on its cost to the federal treasury.
Scholarship Granting Organizations: SGOs must be 501(c)(3) public charities operating exclusively within a single state. They must provide scholarships to at least 10 students who do not all attend the same school, dedicate 90% or more of qualified contributions to scholarships, and cannot allow donors to designate funds for a particular student.
Student Eligibility: Families with incomes below 300% of area median income qualify. Students already attending private school are eligible -- they need only be eligible for public school, not actually attending one. Homeschoolers also qualify.
Covered Expenses: Scholarships can cover private school tuition, tutoring, transportation, and special education services.
State Opt-In: Each of the 50 states and DC may opt in or out of the program, giving governors control over implementation.
Cost Projections
With no Senate cap on the program, cost estimates vary dramatically. If a modest number of taxpayers claim the credit, annual costs could remain in the low billions. But analysis suggests that if uptake reaches 59 million claimants (a plausible number given the credit is available to any taxpayer, not just parents), costs could reach $101 billion per year -- making it one of the most expensive federal education programs ever created.
Historical Significance
The federal voucher program represents the culmination of a 35-year campaign by ALEC, the Heritage Foundation, the DeVos family, and the religious right to redirect public education funding to private and religious institutions:
Capture Significance
The federal voucher program achieves through tax policy what could not be achieved through education policy. By structuring the subsidy as a tax credit rather than direct spending, the program: (1) bypassed the appropriations process and its oversight mechanisms, (2) created an entitlement with no spending cap in the Senate version, (3) used the tax code to create a permanent constituency of private school parents and religious institutions with a financial stake in the program's continuation, and (4) established the principle that federal tax dollars should flow to religious education -- a foundational shift in the relationship between church and state.
Combined with the March 2025 executive order to dismantle the Department of Education and the ongoing defunding of public schools, the voucher program represents the legislative pillar of a comprehensive strategy to privatize American education. The July 4 signing date was itself a deliberate symbolic choice, framing the transfer of public education funding to private institutions as an act of liberation.